That was the considered opinion of life sciences industry experts that was also exemplified by the buoyant mood of many of the 30,000 or so people involved in its business who descended on San Francisco during the second week of January to attend one or more of the many conferences being held there. Despite the rainy weather, many were looking forward to back-to-back partnering meetings that would hopefully advance their businesses. And being the start of a new year, it was also a good time to get a read on the coming year.

Sara Radcliffe, CEO, CLSA

The state of the industry and what to expect in the year ahead was the subject of several sessions at the 10th Biotech Showcase, which was held at the Hilton Hotel. At a lunch plenary session, California Life Sciences Association CEO Sara Radcliffe declared that “we are obviously living in extraordinary times” not only due to rapid advances in biology and technology, but also in the policy and legislative environment. She posited that the industry is at a tipping point that will transform the future—an era of cures rather than chronic illness.

Ron Cohen, president and CEO of Acorda Therapeutics disagreed about calling it a tipping point, and instead referred to the state of the life sciences today as “an accelerating arc of progress as the various vectors of human inquiry and knowledge advance and then coalesce, including AI (artificial intelligence), machine learning, CRISPR Cas9, RNAi, mRNA, stem cell therapy, and gene therapy.”

Countering that “arc of progress” are the societal factors such as reimbursement issues, cost issues, inequitable access to healthcare, and insurance, to name a few. “We are not in a position of luxury,” he said. And we could go backward if the industry doesn’t address these issues.

Jim Greenwood, president and CEO of BIO, the Biotechnology Innovation Organization, described the state of the industry as a race. “We are in a race between very good science and a lot of proposals that are bad policy,” he said. “And one of those horses is going to win that race. If the bad policy wins, then innovation stops and we go backwards.”

Big3Bio attended several sessions on what to expect in 2018 and hot topics including VC investment and the public markets, M&A and IPO exits, drug pricing and access to healthcare, and innovative technologies and therapies that could turn chronic diseases into cures. Based on the discussions, we offer some ideas of what to look for in the coming year.

Financing: Venture investment in life sciences companies will remain healthy but decline slightly from 2017, which was a record year at $15.5 billion, up 31 percent from 2016, with a record $2.8 billion invested in series A rounds, according to Silicon Valley Bank (SVB). U.S. healthcare venture fundraising, reached $9.1 billion, a 26 percent increase over 2016, so there is a lot of money to be put to work. We’ll see continued investment from traditionally tech venture firms as technology and biology converge in areas such as machine learning and AI. VCs are interested in immune-oncology, and neurodegenerative diseases. There is also renewed VC interest in medical devices and the promise of technology to advance diagnostics and tools, says Jonathan Norris, managing director at SVB.

Public Markets: You have to have a level of optimism to invest in biotech, says Kris Jenner, partner at Rock Springs Capital. Although the Dow Jones Industrials and the Nasdaq Composite outperformed the Nasdaq Biotechnology Index in 2017, the outlook for small and midcap biotech in the public markets is good, according to Kris Jenner, he says. Factors that make for an optimistic outlook include good access to capital, a constructive regulatory environment, ample biologic insights in critical areas such as gene and cell therapies and RNAi, significant clinical activity, and fair valuations. Gabriel Cavazos, director of investment banking at Leerink Partners concurs. He said it will be a good year for IPOs with generalists coming back into the sector. Cavazos said the market is currently science driven rather than momentum driven. He cited strong biotech company management teams and the fact that crossover investors came back to biotechnology last year to support IPOs in 2018. Oncology IPOs will continue to dominate the market. John Nolan, managing director at WBB Asset Management noted that the industry can’t underestimate the new changes in the tax code and the repatriation of overseas cash will be a boon to the industry.

M&A: All signs point to a good year for M&A as changes in the tax code bring new money to bear on Big Pharma and Big Biotech continue to replenish their pipelines. Just a couple of deals were announced ahead of JPM week, disappointing many, but Jenner says it will at least be an average year for M&A. With fundamentals for VC-backed M&A exits good in 2017 at 3.5 years from a series A funding round to exit, Silicon Valley Bank predicts that M&A will remain steady throughout 2018.

Innovation: Despite some signs of investor fatigue, immuno-oncology (I-O) will continue to be a hot area, with more than 1500 on-going clinical trials in I-O. First readouts for companies developing combination therapies, due early this year, will be Incyte Pharma’s IDO1 enzyme inhibitor epacadostat combined with Merck’s PD-1 blocker Keytruda in a range of tumor types. Adam Feuerstein, national biotech columnist at STAT, said if that study fails, it will be a huge disaster and will take the wind out of the sails. If it is successful, it will lift the whole sector. The U.S. Food and Drug Administration (FDA) approved 46 new drug approvals (NDAs) in 2018 and two new gene therapies, the highest number since 1996. Signs point to another robust year for NDAs. At a panel reflecting on 2017’s record-breaking venture numbers, panelists were asked what they focus on if they were to start a company today. Replies included anti-infectives, digital therapeutics, anti-fungals, pharma services, a transfection company, and rare and orphan diseases—deliver new therapies to patients.

Drug pricing: The cost of drugs continues to be the elephant in the room, especially as new curative therapies are approved and come to market. Even though the US government didn’t make good on its threat to curb drug prices, companies have started to tackle the issue with more pay for performance deals and talking more openly about the cost of drugs. Several panelists praised Spark Therapeutic’s handling of the pricing for its new gene therapy Luxturna. BIO CEO Jim Greenwood said the solution to the problem about price is technical and simple, but the political problem is difficult because legislators have targeted pharma as a big reason for spiraling healthcare costs. “The number one issue about pricing is that people have conflated the out-of-pocket cost with drug pricing,” Greenwood said. “What people pay is determined by their insurance policy. We cannot price our way out of this dilemma. In a time when our price increases are very small (1.2% according to CMS) what is exploding is the patient having to reach into his pocket because of high co-pays, co-insurance, deductibility. And we are bearing the brunt of that. I tell lawmakers that their constituents are not upset by the cost of drugs. Consumers care about what’s coming out of their pockets.”

Finally, Gender Diversity: Gender diversity will continue to be an issue in the industry, especially in light of the #MeToo movement. Sara Demy, founder of Demy-Colton and co-producer of Biotech Showcase noted that every panel at this year’s event had a woman on it. But the biggest story of the week appeared in STAT under the title, “Men named Michael outnumber female CEOs presenting at #JPM18.” It should be noted that Biotech Showcase had a higher proportion of female speakers than JPM.